On Aug. 11, 1994, a U.S. consumer made what is believed to have been the world's first online transaction: A compact disk recording by the British rock musician Sting. Like it or not, that simple purchase transformed commerce forever.
Today, online orders are so commonplace that for some age demographics (think younger than you) the idea of buying a product in a store is a foreign concept. Yet the online uptake is a recent phenomenon: For example, the typical U.K. consumer first ordered online in 2005, according to a survey by British retailer Shop Direct referenced in a communiqué today by consultancy Transport Intelligence (Ti). Books were the most popular commodity bought online at the time, according to the report.
Today, the U.K. has the highest per capita online spend of all countries, forking over 91 billion pounds in 2013, according to the report. That translates into about $145 billion.
It may be hard to believe given e-commerce's present-day ubiquity, but consumers were initially cool to its adoption, said Stephen Olugbode, a senior analyst at Ti. Delivery problems, security issues with the use of credit cards, poor stock availability, and cultural inertia kept many consumers away, said Olugbode. Their reluctance was compounded by the psychological scars left by the bursting of the dot-com bubble at the turn of the century, he added.
Consumers' collective cold feet disappeared long ago, at least in Britain. Today, many U.K. retailers believe that online activity won't plateau until it accounts for 35 to 40 percent of their total sakes, according to the Ti analysis.
The growth of Internet shopping has been driven in part by the logistics and express industry's ability to adapt their networks to the new form of commerce. As we all know, online shoppers today require that products be priced comparable or lower than bricks-and-mortar retailers and that the goods be delivered fast and free to a convenient location.
As customers' expectations continue to grow, so has the sophistication of these logistical support systems. Information technology has become the key differentiator. Today, customers can choose specific one-hour windows for their deliveries and can receive continuous text messages updating them on the precise location of their purchases.
IT systems are also a fundamental part of the multichannel mix, with retailers requiring total transparency over stock levels and location. Online fulfillment is more complex than so-called store-based logistics, with goods being picked in a different way and often from different locations.
As a result, many companies are beginning to question whether today's online fulfillment models are viable over the long term, according to Olugbode. The added complexities of the process, combined with the increased labor expense associated with picking and packing, means logistics costs for online fulfillment are much higher than for brick-and-mortar retailing, he said.
The upshot of all this? An opportunity for traditional logistics providers to develop attractive outsourcing solutions to serve online merchants, according to Olugbode.
